The tax implications of gifting a holiday home, and how to tackle damp issues both practically and legally
Virtually every old house will have some sort of damp problem
Q In 1989 my wife and I, who have always been residents in the Republic of Ireland, bought a holiday home here in our joint names.
Having allowed for the change in currency from punts to euro in the intervening years and the indexation which was abolished some years ago, the purchase price of the property for the purposes of assessing Capital Gains Tax in the event of sale would be in the region of €75,000. The property is currently valued at €200,000 and is mortgage free.
My wife wishes to remove her name from the title and gift her interest to her brother. Under this proposal, with which I am in full agreement, the property would be held in the joint names of myself and my wife’s brother.
I would greatly welcome any information in relation to the financial implications of this proposal .
A You should always obtain specialist tax advice but in brief, there are two capital taxation issues in your question. Your wife will have capital gains tax exposure and your brother-in-law will have capital acquisitions tax exposure.
Capital Gains Tax (CGT) is charged on the capital gain (profit) made on the disposal of any asset. It is payable by the person making the disposal.
The profit (the difference between the price you paid for the asset and the price you sold it for) is considered taxable income. Because the property is a holiday home, your wife cannot avail of principal private residence relief. The gifting of a property is treated, for tax purposes, as a sale at market value by the disponer (person giving the gift). The standard rate of Capital Gains Tax is 33 per cent for disposals made on or after December 5th, 2012. Revenue.ie provides good examples of CGT computation.
Your brother-in-law will have to pay Gift Tax. The first €3,000 received from an individual is tax exempt. Gifts and inheritances can be received tax-free up to a certain amount. The tax-free amount, or threshold, varies depending on your relationship to the person giving the benefit. As a sibling of the disponer, he is in the Revenue’s Group B Category. This means he can receive tax-free gifts up to the value of €30,150. The tax rate is 33 per cent.
In summary, your wife gifting her half of the property to her brother may well be a tax inefficient proposal. Your accountant or tax adviser might suggest other options.
Simon Stokes is chair of the residential property professional group of the Society of Chartered Surveyors Ireland , scsi.ie
Q I recently inherited an old detached house that belonged to my aunt. It’s located in a rural area. My partner and I have been renting accommodation for the past few years and have some savings, which we would like to spend on renovating the property before we move in.
The house has been uninhabited for a number of months but we have noticed that there are discoloured patches (light brown) on the interior walls in two separate rooms.
We don’t know if the patches are a recent occurrence or have been there longer. We don’t have any knowledge in this area and don’t know what’s causing it or how to fix it. Any advice would be much appreciated.
A This house has been occupied in recent times and presumably it has been upgraded in the last 30/40 years. It would be useful to know the original construction and subsequent repair and upgrade work.
Typically when houses were refurbished, external walls were re-rendered, internal walls dry lined, ground levels raised and roof finishes replaced.
Both traditional and modern methods of building are able to function efficiently if they are done well and are properly detailed. But over the last four decades, as the understanding of traditional solid walls has largely disappeared, modern techniques have been applied to breathing structures, to disastrous effect.
Cement renders, along with “plastic” paints, waterproof sealants and damp proof courses, act as barriers to the wall’s natural ability to breathe. This is when trouble occurs, with a mix of technologies that trap water within permeable materials exacerbating the very problems they are trying to resolve.
The source of dampness can be remote from the place where you are seeing it. Venting vacant buildings is crucial. Lack of ventilation can cause rot to manifest.
Virtually every old house will have some sort of damp problem, varying from something simple that is easily remedied to a long-standing issue that is impossible to resolve and may have to be ‘managed’ and accepted.
Damp staining can be associated with condensation, penetrating damp, rising damp, plumbing leaks and the effects of salts from rising ground salts; chimney flue gases on interior walls; urine saturation where animals have been kept.
The discoloration is likely to result from one of the aforementioned issues. Your problem may be simple to resolve. The most important rule is to diagnose the true cause and, if possible, tackle the problem at source rather than simply treating the symptoms.
Old buildings require different degrees of interest and skills, and not all jobs are advisable for the untrained, or even for the seemingly dextrous. In order to assess the problem, I suggest you contact your local chartered building surveyor with experience of old buildings, who can also advise you on the renovation of the property.
Jim Drew is a member of the Society of Chartered Surveyors Ireland
Q I bought my duplex new in 2006, and there is a serious problem with damp in the communal area (shared with one other duplex) emanating from a leak in the roof.
I have been highlighting the issue to the management company for over four years now, and have received conflicting correspondence on what’s been/being done about it – mainly that the construction company (wh ich is on-site and building) have responsibility for fixing it before the communal area is handed over to the management company.
At this stage, nothing has been done, and the damp has extended to the full height of three separate walls, with black mould and mushroom-like fungal growths in many patches outside my door.
In addition to the aesthetic element, I have respiratory trouble and I’m concerned this is a health hazard.
I have paid thousands in management fees (including sinking fund fees) and cannot believe that this problem has yet to be fixed. I’d be grateful for any advice on how I can have it finally dealt with.
A Unfortunately, this is not an uncommon problem. The owner of the common areas has the responsibility to repair the roof until it is transferred to the owners’ management company (OMC).
I draw your attention to section 13 of the Multi-Unit Developments Act 2011 (MUDs Act) where the owner of the common areas must be afforded reasonable notice and opportunity to carry out the repairs.
The OMC should have appropriately recorded the communications to and from the development company so as to prove beyond reasonable doubt that the owner of the common area was made aware of the problem. Should the leak not be resolved by the owner of the common areas, the OMC has the right to undertake the repairs itself and recover the cost from the owner, who is the liable party.
The developments’ common areas should be in the ownership of the OMC as and from the 1st day of October 2011. It would be fair to say that the only way to have this resolved now is to appoint legal representation for the OMC to deal with the issue.
The process is tedious and expensive and will require the board of directors to actively manage the solicitor dealing with the issues to ensure that the action does not stagnate.
The OMC will need to arrange for the financing of legal representation in accordance with section 18 of the MUDs Act. This will inform the members of the OMC of the task at hand as well as appropriately make available the necessary finances.
The OMC may apply to the Circuit Court under section 24 of the MUDs Act to seek a court order to compel the owner of the common areas to fulfil their obligations and repair the roof.
I would strongly recommend that the tender process for legal services includes appropriate reference letters proving their abilities and evidence that they have experience with common area transfers.
The legal representation for the OMC must be a separate entity, independent of that representing the legal interests of the owner of the common areas.
Paul Huberman is a member of th e property and facilities management professional group of the Society of Chartered Surveyors Ireland